Measuring Inadequacy in Compensation for the Compulsory Acquisition of Land: Evidence from Bengaluru, India

Abstract

Taking inspiration from the longstanding problem of inadequate compensation for the compulsory acquisition of private land for a public purpose, this research estimates the economic value of (i) future development potential of land or ‘hope value’; and (ii) depreciation in property value due to acquisition notification or ‘blight’. Using empirical data on property transactions conducted in the Bengaluru Mysore Infrastructure Corridor (BMIC) project area and registered with sub-registrar offices in Bengaluru India during 2007–14, this research innovatively combines the duration model and hedonic price model to estimate the above. Results indicate that the current mechanisms for compensation are inadequately compensating for the land. The loss of the hope value ranges between 2.39 to 8.35 times the market value of agricultural land in 2006 and loss due to blight is approximately 31 percent. Compensating for these losses ex-ante should induce fairness in the compulsory acquisition process and reduce arbitrariness in the valuation of essential components of a compensation package, thus unburdening the valuation responsibilities of the legal institutions. These findings empirically support the argument of payment of additional monetary compensation to the market value of land and provide a rational measure of the same.

Keywords

• compulsory land acquisition
• hope value
• blight
• fair compensation
• India